Trump to meet companies that use steel, aluminium to discuss tariffs

US President Donald Trump is scheduled to attend a White House meeting that would include representatives of breweries, beverage-can manufacturers and automakers on March 8, 2018.
US President Donald Trump is scheduled to attend a White House meeting that would include representatives of breweries, beverage-can manufacturers and automakers on March 8, 2018.PHOTO: EPA-EFE

WASHINGTON (BLOOMBERG) - White House economic adviser Gary Cohn is summoning executives from US companies that depend on aluminium and steel to meet President Donald Trump this week in a last-ditch effort to halt steep tariffs announced last week, according to two people familiar with the matter.

Cohn is arranging for a White House meeting on Thursday (March 8) that would include representatives of breweries, beverage-can manufacturers and automakers, along with the oil industry. Trump is scheduled to attend the meeting, said the people, who spoke on condition of anonymity to discuss a policy disagreement.

A Trump order to impose the tariffs would be a huge setback for Cohn, who has vigorously opposed the move, citing concerns that it would harm the economy.

This decision is viewed inside the White House as a possible breaking point for Cohn, a former senior executive at Goldman Sachs Group, and some insiders believe he will depart if Trump doesn't take his advice on the issue.

Trump advisers who favour the tariffs want him to sign the paperwork while in Pennsylvania steel country on Saturday, but the signing location has not yet been decided, according to two people familiar with the location discussion.

Cohn's effort to organise the meeting unfolded on Monday as Republicans in Congress began an extraordinary public campaign to halt the tariffs. Cohn and Republican leaders on Capitol Hill are worried about repercussions, including a trade war.

Also expected to attend the White House meeting are Chief of Staff John Kelly, Commerce Secretary Wilbur Ross, Trade Representative Robert Lighthizer and trade adviser Peter Navarro.

The president has vowed that he would press forward on his tariff plan, even as House Speaker Paul Ryan warned against it.

 

"No, we're not backing down," Trump told reporters on Monday, less than an hour after a spokeswoman for Ryan said the top House Republican was urging the president not to advance with the tariffs.

"We are extremely worried about the consequences of a trade war," Ryan's aide AshLee Strong said in a statement.

The president's concerns may be more immediate as he looks at strategies for helping Republicans win House seats in 2018. His trip to southwestern Pennsylvania on Saturday will be a few days before a special election in the heart of steel country.

Republican Rick Saccone, who is seeking to fill the seat of fellow Republican Tim Murphy - who resigned in October 2017 after revelations he suggested that his mistress seek an abortion - has struggled against Democratic challenger Connor Lamb. 

A poll from Emerson College released on Monday was the first to show Lamb with a lead in the race - a 48 per cent approval rating compared to 45 per cent for Saccone.

Trump won the Pennsylvania district by 20 points in 2016, and a Republican loss there could portend a wave election in November that would put Democrats in control of the House of Representatives.

The Pennsylvania district includes some 17,000 voters who are either steelworkers or related to them, the American Federation of Labour and Congress of Industrial Organisations (AFL-CIO) told the Pittsburgh Post-Gazette. 

But Trump's political calculus risks being short-sighted if the tariffs prompt a trade war that slows economic growth or results in American businesses in important districts and states being targeted.

Harley-Davidson, the motorcycle maker based in Wisconsin, Ryan's home state, is facing threats of retaliation from Europe over the steel and aluminium tariffs.

European Commission President Jean-Claude Juncker said the EU may target imports of the company's motorcycles as well as Kentucky bourbon and Levi Strauss jeans.

Harley-Davidson already is being hit by a deepening slump in American motorcycle demand, which has spurred job cuts and a plant closure at the Milwaukee-based company.

Trump wants to protect industries that are "the backbone of this country" and to "make sure we're doing everything we can to protect American workers," said White House spokeswoman Sarah Huckabee Sanders at a Monday briefing for reporters.

Separately, Trump tweeted on Monday that he hopes to use the tariffs as leverage to renegotiate trade deals, including Nafta, that remain unpopular in much of the Rust Belt.

"Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed," he said.

 

Meanwhile, Goldman Sachs Group delivered a comprehensive critique of Trump's planned metal tariffs, saying that they risk damaging the world's biggest economy by raising costs just as price pressures build, hurting allies more than others, and creating a two-tier global market.

"Import tariffs make the US less competitive by raising the prices of raw materials," the New York-based bank said in a report on Tuesday.

It added: "By imposing across-the-board tariffs to all steel and aluminium imports, the larger economic impact is on Canada, Mexico and the EU, and it ironically eases the economic impact to China and Russia."

"The president has likely created a two-tier metal market," analysts led by Jeff Currie wrote in the report. "Economically, a two-tier market is ultimately damaging to US downstream industries that consume these metals, as it creates an uneven playing field for US industries that face higher metal prices."

Goldman flagged the potential for the tariffs - should they be imposed under Section 232 of the 1962 Trade Expansion Act - to risk adding to inflationary pressures just as the Federal Reserve has been raising interest rates.

"Net consumers of steel and aluminium in the US now face cost disadvantages relative to their international competitors, especially at a time when the labour market is tight and wage inflation is picking up," the bank concluded.

"This is the irony of Section 232: a tariff intended to support US industry may end up boosting margins and investment for a small subset of producers while leaving the broader economy at a disadvantage."

As Goldman weighed in, BHP Billiton delivered its own negative assessment, with the world's biggest miner describing Trump's move as a "black day for the world."

BHP Billiton and competitors could be hit should other economies follow the move by the US toward a more protectionist and anti free-trade agenda, Chief Executive Officer Andrew Mackenzie said on Tuesday at a business summit in Sydney.

"I am worried about this sentiment shift that people all around the world might suddenly say that free trade isn't good for the world and that would be particularly bad for a trading company like BHP," Mackenzie said during a panel on the economy. "We have to speak up loudly against these measures as being bad for America and bad for the world."